Economic Decline Slows Down in 2016

10 may 2016

The economic decline in Russia is stabilizing: while the current contraction is significant, in quantitative terms it is not that great, according to the Bulletin of the social and economic crisis in Russia entitled Foreign Trade: Changes in Structure and Trends, prepared by experts of the Analytical Center.

In 2016, the decline of most economic indicators has slowed
down. "Even the further decrease of GDP by 1% by the end of this year in Russia
may be regarded as a sign of stabilization at a new level that is going to be
followed by growth and modernization," the experts write.

They are convinced that it is not easy for any country’s
economy to adapt to the kind of external pricing shock that Russia is going
through right now, which involves dollar exports falling by a third within one
year. Given the other problems that the national economy is facing, such as
weak saving processes, low competitiveness in a number of industries, high
income inequality, and a significant inflation rate prior to the crisis, the
economic downturn the country is experiencing does not look as bad as could be
expected.

The experts also believe that in the past five years,
exports growth has been slowing down all over the world relative to the global
GDP growth, while prior to the 2008-2009 crisis, exports had been growing
faster than GDP.

As household consumption in Russia fell by 10% and
investments fell by 8% in 2015, net exports were up 72% (in 2009 they were up
57%), primarily as a result of s sharp decline in imports, and this is what
kept the negative GDP growth at just -3.7%.

At the same time, some changes also occurred in the
structure of Russia’s foreign trade because of the crisis. As expected, the
share of APEC in Russian exports went up even as the share of the EU and the
CIS (because of Ukraine) went down. While the structure of commodities exports
remained largely unchanged in real terms, in dollar terms the share of oil
decreased.

As far as imports are concerned, there was a significant
decline in the imports of cars and groceries (as a result of the sanctions) but
imports of machines and equipment are still high, the bulletin notes. With
regards to imports of groceries, Russia is now buying its food from new
suppliers. Partially, imports of groceries are being substituted thanks to an
increase in domestic production, even though in agriculture this process takes
a long time. Paradoxically, success in the growth of a number of agricultural
sectors depends to a large degree on the sanctions and counter-sanctions
continuing at least in the short term. As a result, a well known protectionist
industrial policy is taking shape: the domestic market has been temporarily
closed to allow domestic producers to modernize and become more
competitive.

See more
in the Bulletin Foreign Trade: Changes in Structure and
Trends

Other issues of the Bulletin on the social and economic
crisis are available under Publications.